IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/4229.html
   My bibliography  Save this paper

The Underground Economy in Canada

Author

Listed:
  • Tedds, Lindsay

Abstract

There is considerable agreement internationally about the factors that determine the relative size of the underground economy (tax burden, regulation, enforcement, confidence in government, labour force characteristics, and morality) and that evidence of underground activity will be captured in several economic indicators (GDP, currency in circulation, and consumption rates). Until recently, however, the methods that have been employed to measure the underground economy focused on only a few causal factors, one indicator, and only produced an estimate for one particular point in time. There exists a modeling technique that treats the underground economy as an unobservable or latent variable and incorporates multiple indicator and multiple causal (MIMIC) variables. The MIMIC model uses information contained within relevant indicator and causal variables to estimate a time-path of the size of the hidden economy. In applying this estimation technique to Canada data, my results indicate that, the underground economy in Canada grew steadily relative to measured GDP over the period 1976 to 2001. The value of the broadly defined underground economy grew from about 7.5% of GDP in 1976 to about 15.3% in 2001. In real (1997) dollar terms, it increased from about $38 billion to $159 billion.

Suggested Citation

  • Tedds, Lindsay, 2005. "The Underground Economy in Canada," MPRA Paper 4229, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4229
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/4229/1/MPRA_paper_4229.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Friedrich Schneider & Christopher Bajada, 2003. "The Size and Development of the Shadow Economies in the Asia-Pacific," Economics working papers 2003-01, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Frey, Bruno S. & Weck-Hanneman, Hannelore, 1984. "The hidden economy as an 'unobserved' variable," European Economic Review, Elsevier, vol. 26(1-2), pages 33-53.
    3. David E. A. Giles, 1998. "The Hidden Economy and the Tax-Gap in New Zealand: A Latent Variable Analysis," Econometrics Working Papers 9807, Department of Economics, University of Victoria.
    4. Andrew Dilnot & C. N. Miller, 1981. "What do we know about the black economy?," Fiscal Studies, Institute for Fiscal Studies, vol. 2(1), pages 58-73, March.
    5. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, vol. 39(1), pages 17-32, June.
    6. Rolf Mirus & Roger S. Smith, 1981. "Canada's Irregular Economy," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 444-453, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Villa,Edgar & Misas,Martha A. & Loayza,Norman V., 2016. "Illicit activity and money laundering from an economic growth perspective : a model and an application to Colombia," Policy Research Working Paper Series 7578, The World Bank.
    2. Roberto Dell'Anno & Ferda Halicioglu, 2010. "An ARDL model of unrecorded and recorded economies in Turkey," Journal of Economic Studies, Emerald Group Publishing, vol. 37(6), pages 627-646, November.
    3. Mai Hassan & Friedrich Schneider, 2016. "Modelling the Egyptian Shadow Economy: A Currency Demand and A MIMIC Model Approach," CESifo Working Paper Series 5727, CESifo Group Munich.
    4. Roberto Dell'Anno & Adalgiso Amendola, 2008. "Istituzioni, Diseguaglianza ed Economia Sommersa: quale relazione?," Quaderni DSEMS 24-2008, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    5. Lindsay Tedds, 2010. "Estimating the income reporting function for the self-employed," Empirical Economics, Springer, vol. 38(3), pages 669-687, June.
    6. Lindsay Tedds, 2010. "Keeping it off the books: an empirical investigation of firms that engage in tax evasion," Applied Economics, Taylor & Francis Journals, vol. 42(19), pages 2459-2473.
    7. Awadh Ahmed Mohammed Gamal & Jauhari B.Dahalan, 2015. "Estimating the Size of the Underground Economy in Saudi: Evidence from Gregory-Hansen Cointegration Based Currency Demand Approach," Abstract of Economic, Finance and Management Outlook, Conscientia Beam, vol. 3, pages 1-6.
    8. Nikopour, Hesam, 2003. "Measuring the size of underground economy in Iran with emphasis on the incentives for evasion of insurance premium payment (1961 – 2001)," MPRA Paper 13176, University Library of Munich, Germany, revised 05 Feb 2009.
    9. Hassan, Mai & Schneider, Friedrich, 2016. "Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013," IZA Discussion Papers 10281, Institute for the Study of Labor (IZA).
    10. Corina - Maria Ene & Andrei Stefanescu, 2011. "Size And Implication Of Underground Economy In Romania - A Mimic Approach," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(13), pages 1-8.
    11. Vargas, Jose P Mauricio, 2012. "To be or not to be informal?: A Structural Simulation," MPRA Paper 41290, University Library of Munich, Germany.
    12. Mai HASSAN & Friedrich SCHNEIDER, 2016. "Modelling the Egyptian Shadow Economy: A MIMIC model and A Currency Demand approach," Journal of Economics and Political Economy, KSP Journals, vol. 3(2), pages 309-339, June.
    13. Misbah Kiani & Adeel Ahmed & Khalid Zaman, 2015. "Combining qualitative and quantitative approaches for measuring underground economy of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 295-317, January.

    More about this item

    JEL classification:

    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:4229. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.